Study: Government Spending More on IT

By Darryl K. Taft  |  Posted 2003-04-28

Despite the economic downturn, spending in the federal sector continues to grow, spurred by homeland security initiatives and e-government, according to a recent research report.

Input Inc., a Chantilly, Va., market research company that specializes in the public sector, said federal spending on IT products and services will grow to $68.2 billion in 2008, up from $45.4 billion for fiscal 2003.

The Departments of Defense, Homeland Security, Transportation, Energy and Treasury are the biggest spenders, the report said. The five agencies will account for as much as 70 percent of federal IT spending in 2008, Input said.

Kevin Plexico, an analyst at Input, said, "A very significant portion of the growth in federal spending is going in the areas of homeland security and e-government."

Plexico said outsourcing will represent the bulk of federal IT spending. The trend toward outsourcing has been evident for a few years in the government, but now "some agencies have switched to it wholesale," Plexico said. "It is an area of growth."

The governments reorganization to focus on homeland security opens new opportunities for contractors, said IT vendors.

"The consolidation of agencies ... is helping to drive an increase in IT demand across the federal government," said Steve Perkins, senior vice president of Oracle Federal and Oracle Homeland Security Solutions, a Reston, Va., division of Oracle Corp. "Initiatives have been prompting agencies to consolidate their data ... and the governments homeland security mission is accelerating this effort."

Jon Korin, executive director of strategic development at Northrop Grumman Information Technology, the Herndon, Va., division of Northrop Grumman Corp., said, "We see four major trends driving demand for IT solutions and services in the federal market: security and information sharing, value-based procurement, transformation, and agencies increasing their focus on their core missions."

Korin added: "As government outsources IT, networking and related services, this trend enables agencies to focus on their core mission. Clear focus is critical to success in these times of rapid government transformation. These requirements are driving federal IT spending today. We anticipate that they will continue to fuel market growth into the future."

"Agencies of all levels are going to need to be able to share information and communicate with one another in real time as they work together to protect our homeland and citizens," said Jerry Edgerton, senior vice president of MCI Government Markets, of Vienna, Va. "We anticipate that the development of the Homeland Security office will encourage a new arena of communication and project collaborations with state, local and federal organizations."

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